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Texas bankruptcy lawyer, TX chapter 7 attorney, A bankruptcy can help by allowing you to discharge your debts and no longer be legally responsible for repaying those debts, giving you the chance to start over. This blank slate comes with a price, however. Filing for bankruptcy will affect your credit score and can make it harder to get future loans or credit cards. Nevertheless, for many people who are in financial trouble, there is no other way to remedy the situation but to file for bankruptcy. There are two types of bankruptcies that are commonly filed by individuals in the United States -- Chapter 7 bankruptcy and Chapter 13 bankruptcy. Each type of bankruptcy has its own way of helping those who are in insurmountable debt, with Chapter 7 bankruptcy discharging most or all of your debts and Chapter 13 reorganizing your debts into more manageable monthly payments. Qualification requirements also vary depending on the type of bankruptcy you choose to go with.

Chapter 7 Bankruptcy

The idea behind a Chapter 7 bankruptcy is that you do not have enough income to repay all of the debts that you owe. As such, most of your debts are discharged in a Chapter 7 bankruptcy. In 2005, bankruptcy laws changed to add income limits to qualify for a Chapter 7 bankruptcy. The past six months of your income will be used to determine whether or not you qualify for a Chapter 7 bankruptcy along with the number of people in your household. Generally, the income limits are as follows:

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Very broadly speaking Chapter 7 handles simple debts as well or better than Chapter 13 does, which handles more difficult debts better.


Debts in Bankruptcy

When deciding between Chapter 7 “straight bankruptcy” and Chapter 13 “adjustment of debts” you look at many factors. You have to meet certain qualifications (usually easy to meet) to file either one. The amount of your income, the nature of your assets, whether you own a business, and your immediate and long-term goals—all of these come into play.

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We show how wise timing in your filing of a Chapter 13 “adjustment of debts” case could shorten your payment plan from 5 years to 3 years.


Chapter 7 vs. Chapter 13

Two days ago we showed the importance of timing in the filing of a Chapter 7 case. The timing can affect whether you can qualify to be in a Chapter 7 “straight bankruptcy” case. If your income is too high you may not pass the “means test.” If you can’t pass this test you’d instead have to go through a Chapter 13 “adjustment of debts” case. That requires you to pay for 3 to 5 years into a payment plan, instead of being able to “discharge” (write off) all or most of your debts within about 4 months.

But what if you need a Chapter 13 case? It can be the much better option in certain circumstances. If you have debts that can’t be discharged like recent income taxes or child/spousal support, or debts you want to catch up on like a home mortgage, Chapter 13 buys you time to take care of those special debts. There are many other reasons Chapter 13 may be better for you than Chapter 7.

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Posted on in Chapter 7

Most people easily pass the means test based on their relatively low income. Timing plays a huge role in calculating your income.


The Means Test

To file and complete a Chapter 7 “straight bankruptcy” case you have to qualify for it. The main hurdle in qualifying is what’s called the “means test.” That is, to qualify for Chapter 7 you have to show that you don’t have too much “means.”

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Your domicile, and sometimes your residence, determines whether you can file bankruptcy, where to file, and what property you keep.

1. Who Can File Bankruptcy? A person can file a bankruptcy case in a U.S. bankruptcy court if he or she “resides or has a domicile, a place of business, or property in the United States.” (Section 109(a) of the U.S. Bankruptcy Code.)

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